Investors’ desire for buybacks, dividends highest in 9 yrs: Bofa

Shareholders tapped emerging market equities in March — the fastest pace since April 2017

Investors’ desire for companies to prioritise returning cash to shareholders through share buybacks, dividends or mergers and acquisitions (M&A) is at the highest level since July 2015, said a survey by Bofa Securities (Bofa). Nearly 30 per cent of respondents wanted companies to do so.

As many as 226 respondents with $572 billion worth of assets under management (AUM) participated in the March fund manager survey (FMS), said Bofa. While 198 participants with $527 billion worth of AUM responded to the Global FMS questions, 119 with $256 billion worth of AUM took part in regional questions.

“Macro bullishness drove investors’ equity allocation to net 28 per cent overweight (the highest since February 2022), while allocation to cash fell slightly to net 5 per cent overweight (down from 6 per cent overweight earlier). On a relative basis, investors are the most overweight equities versus cash since November 2021,” said Bofa.

Investors tapped into emerging market equities in March at the fastest pace since April 2017, and into eurozone stocks at the fastest pace since June 2020. Global growth expectation among the fund managers was at a two-year high. “Risk appetite” was at the highest level since November 2021.

“There has been a rotation into financials at the expense of the US, tech & consumer discretionary (cut by most since May 2015); risk appetite was also expressed via preference for low dividend stocks, which was at the highest level since December 2021. Two-thirds of the respondents said recession was unlikely in the next 12 months; ‘soft landing’ remained the consensus view at 62 per cent probability,” wrote Michael Hartnett, chief investment strategist at Bofa Securities, in a coauthored survey findings note with Elyas Galou, Anya Shelekhin and Myung-jee Jung.

As many as 40 per cent of respondents surveyed by Bofa (62 per cent in December 2023) now expect bond yields across the globe to head lower in the next 12 months. Inflation was seen as the biggest tail risk for markets by 32 per cent of the fund managers surveyed.

‘Magnificent 7’ (Nvidia, Apple, Microsoft, Amazon, Alphabet (Google), Meta Platforms and Tesla) stocks were the most crowded trade among fund managers (58 per cent), according to Bofa’s findings. They were followed by shorting China equities (14 per cent), long Japan equities (13 per cent) and long bitcoin (10 per cent).

As many as 45 per cent of global fund managers believe artificial intelligence-related stocks are not in a bubble zone and 40 per cent think just the opposite, according to the survey.